Shutdown hobbles futures market

A lack of global data about grain supplies due to the government shutdown has left traders and hedgers with less information, potentially leading to lower trading volumes and more caution in the market.

The federal government shutdown has delayed the release of an important crop report that traders rely on for futures market decisions.

The USDA has indefinitely postponed the World Agricultural Supply and Demand Estimates report, known as the WASDE, which was supposed to be released on Oct. 11.

“It’s pretty strange not getting information the market is used to,” said Mike Krueger, principal broker at MK Commodities.

Aside from WASDE, traders have also missed reports about exports and the futures market positions of investors, he said.

“We don’t know when we’ll get that stuff,” Krueger said.

Traders use the information as a window on the market’s future. The prospect that exports of grains are stronger than expected could make traders nervous if they’re betting commodity prices will fall, he said.

With less concrete data, traders are left to divine word-of-mouth stories about foreign purchases, Krueger said. “You still have the rumor mill.”

The market does still have access to supply-an-demand estimates from private analysts, but the USDA figures are considered an industry benchmark, said Rich Nelson, chief strategist for the Allendale Inc. brokerage firm.

“Like it or not, they are the number that everybody puts their faith into,” he said.

With the futures market trading on a dearth of information, the volume of trades will be lower and price shifts less dramatic, Nelson said.

Investors and hedgers are more likely to reduce the size of their futures positions rather than avoid the market altogether, said Henry Kornegay, principal broker at Jackson Commodities.

“It makes them more cautious in what they do, but it doesn’t make them stay away from it,” he said.

However, the market impact may be more pronounced when the USDA does finally begin releasing new statistics, Nelson said.

If those numbers are close to what analysts had expected, the effect will be muted, Nelson said. If the USDA’s estimates deviate substantially after the break, it could trigger a big price move.

The figures probably won’t be readily forthcoming after the government shutdown ends, he said. USDA’s statisticians will need at least 10 days to compile the reports after returning to work.